Ballard v. North American Life and Cas. Co.

• Decision Date: 29 November 1983
• Citation: 667 S.W.2d 79
• Parties: Edith Joan BALLARD, Plaintiff-Appellee, v. NORTH AMERICAN LIFE AND CASUALTY COMPANY, Defendant-Appellant. 667 S.W.2d 79
• Court: Tennessee Court of Appeals

Page 79

667 S.W.2d 79

Edith Joan BALLARD, Plaintiff-Appellee, v. NORTH AMERICAN LIFE AND CASUALTY COMPANY Defendant-Appellant.

667 S.W.2d 79

Court of Appeals of Tennessee,

Western Section, at

Nashville.

Nov. 29, 1983.

Application for Permission to Appeal

Denied Jan. 30, 1984.

Thomas W. Bell, Jr., Memphis, for defendant-appellant.

George E. Whitworth, Memphis, for plaintiff-appellee.

CRAWFORD, Judge.

Defendant, North American Life and Casualty Company (hereinafter Company), appeals from the order of the Chancery Court denying its motion for summary judgment and granting summary judgment to plaintiff, Edith Joan Ballard. Although Company has presented five issues for review, the first and paramount issue involves the construction of a group life insurance policy and the propriety of a summary judgment. Other defendants were originally included in the suit, but the present controversy involves only Company and Mrs. Ballard.

The pertinent facts as established by the pleadings, exhibits and affidavits are virtually undisputed:

Plaintiff's husband, Jack T. Ballard, was an employee of George A. Fulghum Company, an employer participating in a group insurance trust which provided group life insurance to employees of the employers participating in the trust. The group policy involved in this controversy was in effect from December 15, 1972, to March 15, 1977, and both before and after this period other companies had group policies in full force and effect covering the employees. Plaintiff's husband was an insured person under the policy of insurance issued by Company, and although the policy provided life insurance protection only, the policy did contain a waiver of premium provision in the event of total disability of an insured person. In June of 1975, while the life insurance coverage provided by Company was in effect, Mr. Ballard became totally disabled. After notice of disability was given to Company, he was not required to pay any further premiums under the group policy. The group policy provided in part:

27. EXTENSION OF LIFE INSURANCE: An Insured Person's Life Insurance will remain in force after the date it would otherwise terminate pursuant to the following 31-Day Benefit and Total Disability Benefit.

31-DAY BENEFIT: During the thirty-one days in which the Insured Person is eligible to exercise his Life Insurance Conversion Privilege in accordance with the Conversion Provision 31, whether or not applied for, such Insurance will be extended in an amount equal to the maximum amount the Insured Person is eligible to convert.

TOTAL DISABILITY BENEFIT: Such Insurance will be extended upon cessation of premium payments if the Insured Person furnishes the Company with due proof that Total Disability has existed uninterruptedly from the date premium payments ceased and submits to medical examinations, as provided below. Such proof of disability must be submitted within twelve months following cessation of premium payments and thereafter upon request by the Company.

The amount of Insurance extended will be the amount provided in the Schedule of Insurance but not in excess of the amount in force at the time of discontinuance of premium payments. If an Insured Person has Plan B insurance in force it will be extended for its then paid-up value and the balance will thereafter be provided under Plan A. Neither a Policy for his paid-up value nor the cash value of his Plan B insurance will be available to an Insured Person except upon subsequent termination of his insurance.

* * *

TERMINATION: The Total Disability Benefit will terminate upon the earliest of (a) cessation of Total Disability, or (b) failure to submit proof of the continuance of Total Disability, or (c) failure to submit to medical examination as provided above, or (d) termination of this Policy. The Insured Person's Life Insurance will then terminate subject to the 31-Day Benefit and he will be entitled to apply for an Individual policy in accordance with the Conversion Provision 31(i)(b) or (i)(c) as though Active Service had terminated at the beginning of such thirty-one days, unless he returns to Active Service and premium payments resume.

* * *

31. CONVERSION OF INSURANCE:

(i) If the insurance of an Insured Person terminates due to termination of Active Service (for) any reason other than death) or termination of Active Service in a class eligible for such insurance, such Insured Person will be entitled to have issued to him by the Company without evidence of insurability, upon application made to the Company within thirty-one days after such termination of insurance and upon payment of the required premium, an Individual policy, or policies, of life insurance as described in (a), (b) or (c) below. Sections (a) and (b) apply only to Plan B insurance. Section (c) applies to Plan A insurance.

As of March 15, 1977, the group policy was terminated and the Trust placed the group coverage with another insurance carrier. By letter dated March 30, 1977, Company notified Mr. Ballard:

North American Life and Casualty has notified us that under the waiver of premium provision of the master policy and your group certificate, the waiver of premium benefit terminated on March 15. When the coverage was changed from North American to the Guardsman Life Insurance Company, Guardsman did not assume the waiver of premium claims which were filed under the North American contract.

This is to give you notice that North American has agreed to allow you to convert your policy to an ordinary life contract by April 15. Enclosed is a conversion form and notice for the first monthly premium.

Please call our office if you have any questions.

The letter apparently elicited no response from Mr. Ballard and the Chancellor found that Mr. Ballard failed to convert the insurance coverage as offered in the letter. Mr. Ballard died on February 6, 1978, approximately 11 months after Company's policy was terminated. The plaintiff asserted in the trial court, and asserts here, that by virtue of the policy provisions, the right of Mr. Ballard to the waiver of premium benefit vested while the policy was in full force and effect and therefore the policy could not be terminated by the Company while he was disabled. The Company, on the other hand, contends the policy language establishes that the Company may terminate the policy and upon such termination the waiver of premium provision is also terminated.

Although Company contends it had no policy of insurance covering Mr. Ballard at the time of his death, it alternatively denies liability by virtue of various policy defenses. The court did not allow Company to present proof on these other defenses, and this preclusion is asserted as error. As we have above indicated, we do not find it necessary to consider issues other than the issue of whether Mr. Ballard was insured by Company at the time of his death. As to this issue the material facts appear virtually undisputed and therefore summary judgment is the appropriate method for disposition. When there is no disputed issue of material fact, a summary judgment should be granted by the trial court. See Stone v. Hinds, 541 S.W.2d 598 (Tenn.App.1976).

The Chancellor in granting the summary judgment to plaintiff and denying the summary judgment for Company held that Mr. Ballard's right to protection under the waiver of premium provision had become vested prior to the termination of the policy, and "that it would be inequitable to deny this widow beneficiary and the deceased protection under this policy because at the time he was offered the new policy he was disabled, may not have been financially able to avail himself to the opportunity and where there is an ambiguity, it is to be resolved in favor or [sic] the insured who did not draw the contracts and because denying the insurance to the widow under these circumstances would certainly not do equity."

In the absence of fraud or mistake, a contract must be interpreted and enforced as written even though it contains terms which may be thought harsh and unjust. E.O. Bailey & Co. v. Union Planters Title Guaranty Co., 33 Tenn.App. 439, 232 S.W.2d 309 (1949).

In construing contracts, the words expressing the party's intention should be given the usual, natural and ordinary meaning. Moore v. Life & Casualty Ins. Co., 162 Tenn. 682, 40 S.W.2d 403 (1931).

In Guardian Life Ins. Co. of America v. Richardson, 23 Tenn.App. 194, 129 S.W.2d 1107 (1939), the court set out the rule for construction of insurance contracts as:

[5-7] "Contracts of insurance, like other contracts, are to be construed according to the sense and meaning of the terms...